UK’s junior energy companies suffer torrid start to the year[link] UK’s junior energy companies suffer torrid start to the year Sector sees flurry of takeover activity and corporate governance wrangles The new year began with a bang for small-cap energy companies. A flurry of merger and acquisition activity was accompanied by governance tussles as shareholders vented their frustrations with companies’ performance. A protracted and acrimonious hostile takeover of London-listed Faroe Petroleum by Norwegian rival DNO set the tone — with Faroe’s board ultimately conceding defeat this month after six weeks urging shareholders to reject an “opportunistic” bid from its Norwegian suitor, which it said “fundamentally undervalued” the company. The Faroe-DNO spat is not the only show of tension the sector has seen in early 2019. With the price of Brent crude, the international oil benchmark, having recovered from its sub-$30 a barrel lows in early 2016 to over $85 in October, before falling back to around $60 today, shareholders’ expectations of the performance of small-cap E&Ps have risen. Ophir Energy At Ophir Energy, an Asia-focused E&P which trades on the FTSE SmallCap index, investors have grown disgruntled. The shares have fallen almost 90 per cent over the past five years on the back of the oil price crash and a failed attempt to get a west African gas project off the ground. Ophir spent more than two years trying to find a partner to fund Fortuna, its deepwater floating liquefied natural gas project in Equatorial Guinea. But the venture’s prospects were all but extinguished this month when the country’s government denied it a third licence extension, prompting Ophir to book a $300m impairment charge. One shareholder, Petrus Advisers, last week slammed the company over Fortuna’s failure. In an open letter, two partners at the investment group wrote: “We disapprove of how this has been handled and use this letter to again remind you of the priorities for value creation.” Petrus urged management to continue negotiations with the government to salvage some value from the project. They demanded the instatement of a new director to this end, who was appointed one day later. Ophir said a letter received from Equatorial Guinea’s minister for mines and hydrocarbons earlier this month “made it clear” there was no possibility of a further extension to the Fortuna licence. “We have subsequently had further dialogue with the ministry that has confirmed this,” it added. Stephane Foucaud, an analyst at GMP First Energy, said it was unlikely the group would receive compensation. “If I were to look at my crystal ball I would say value is not a cash payment, but maybe they could be given some other licences so that Ophir doesn’t look so bad. That would be the best outcome — if they were to receive anything.” Ophir is currently the subject of a potential takeover by Indonesia’s Medco Energi. The board this month rejected a possible £343m offer, saying that it undervalued the company. Chariot Oil and Gas Shareholders at Aim-listed explorer Chariot Oil and Gas have also expressed frustration with their company’s direction. The shares have tumbled 88 per cent over the past year after two deepwater exploration wells came up dry. The group has for a number of years pursued a strategy of “deepwater elephant hunting”, drilling high-risk wells in the hope of making major finds. But this has yet to pay off, and shareholders have accused management of “value destruction”. Werner Riding, an analyst at Peel Hunt, said Chariot was “regrouping” following its disappointments in a “torrid year”. Mr Riding said Chariot still retained cash of £14m, — 40 per cent more than its current market capitalisation of about £10m. This, he said, meant that while “the future currently doesn’t look as rosy as it could have done . . . they still have options and a meaningful cash base with which to progress their plans through 2019”. Chariot said: “Whilst we share investors’ disappointment with last year’s high risk/high reward exploration programme, we remain focused on delivering the next potentially transformational drilling opportunity.” Angus Energy For Angus Energy, the Aim-quoted oil and gas development company which is focused on onshore projects in Surrey and Sussex, the year has started in particularly dramatic style. The group said last week it had received letters from two shareholders — one of which it believes is connected to its previous chairman, Jonathan Tidswell-Pretorius — calling for a general meeting and a vote on the removal of its managing director, Paul Vonk. The shareholders are also seeking to appoint two new directors to Angus’s board, including George Bingham, the eighth Earl of Lucan. Mr Tidswell-Pretorius departed the company in July last year. The company said at the time that it was investigating whether he had violated any regulations in relation to a previous share dealing. Angus has called the interventions “unwelcome and unnecessary” and said Mr Vonk had the board’s “full support”.

Perspicacity
13 Jan 2019

January 2019 Thanks. Missed that as it was confusingly hidden under ‘new ventures’. As this was an old venture this was presumably to soften the bad news…

TexDrilla
12 Jan 2019

January 2019 Perspicacity: I would have thought that would be RNSable if so. …actually they have RNSed an update on Mauritania a month ago. 11-Dec-18 070 RNS Pre-Close Operational Update

Perspicacity
11 Jan 2019

January 2019 Hidden away at the back on the timeline it says Mauritania is now lapsed. I presume this is referring to the Shell option, which I guess Chariot opted not to go for. I would have thought that would be RNSable if so. All the best P

TexDrilla
10 Jan 2019

January 2019 Corporate Presentation – January 2019 January19.png768x147 10.8 KB Happy New Year all! Here’s hoping Chariot will strike a nice deal on Brazil. Mutibaggerpotential hehehe… All the best for 2019!

theprior
11 Dec 2018

YE18 Cash Position US$19m (4.1p/sh) 180% of current shareprice Well put PM. Fully agree with all you’ve said. They should all walk, all of them. They’re just milking it now and have been for years. 100% failure rate has got to be addressed. TP

preciousmaj
11 Dec 2018

YE18 Cash Position US$19m (4.1p/sh) 180% of current shareprice As per usual this update leaves a lot of unanswered questions, it needs to be made clear where this additional $5m has come from. Is this a typo? Was the previous 2018 year end cash position, after reflecting all well costs, estimated to be in excess of US$14million incorrect? We have relinquished the Rabat Deep block in Morocco, the company have decided against backing in to the C19 block in Mauritania, which is odd as they are currently in negotiation on a “new licence” in the Atlantic margins. Why not just take the 10-20% back in option that Shell are offering in this prospective licence instead? Of course the new licence will come with new commitments like 2d, 3d and data interpretation, which will no doubt keep the “highly experience team” busy for a few years while they continue to milk Shareholders dry.

preciousmaj
11 Dec 2018

YE18 Cash Position US$19m (4.1p/sh) 180% of current shareprice The below has been taken from the Proactive Investors article today, the part in BOLD is key IMO. “At YE18 Chariot anticipates retaining cash of c$19m, well ahead of our previous forecast of $12.9m owing to efficient drilling operations at the recently completed Prospect S offshore Namibia,” said broker, Peel Hunt. “Until greater clarity is provided around the sustainability of the businesses strategy, however, including how it intends to evolve and grow following this year’s drilling disappointments, we keep our recommendation under review,” the broker added. I am surprised that there have been no changes in personnel after the diabolical performance of the company this year. LB is not the man to lead this company, he has wasted over $54m since he took over, has taken over $2.5m in Salary, gained free shares and taken advantage of BOGOF shares. He needs to be SACKED along with his self-proclaimed “Experienced in-house team focused on maximising value”, together they have destroyed market confidence. They won’t be negotiating from a position of strength anytime soon and their poor track record will not improve market sentiment. Changes need to be forced and need to be made before LB takes advantage of the share options under the Long Term Incentive Scheme, the guy has milked Shareholders enough.

dctiffield
11 Dec 2018

YE18 Cash Position US$19m (4.1p/sh) 180% of current shareprice Agree TP. They’ve been pretty teflon coated up until now, despite their abysmal record. Get some new blood in, get some winners. There’s a nasty musty smell building up in that department. Time for a spring clean.

theprior
11 Dec 2018

YE18 Cash Position US$19m (4.1p/sh) 180% of current shareprice Without changes to the team which analyses the seismic they’re doomed. Not many O&G exploration companies can boast a 100% failure rate !

dctiffield
11 Dec 2018

YE18 Cash Position US$19m (4.1p/sh) 180% of current shareprice I’d like to see Bottomley change this rather nauseating phrase ‘safely, efficiently and cost-effectively’ to something more positive like ‘successfully’. Typical operational manager, pleased with the way in which the drill was technically conducted, irrespective of the fact it was a total and very costly failure. Chariot, please get a proper CEO and remove this Ops manager from the top.

preciousmaj
11 Dec 2018

YE18 Cash Position US$19m (4.1p/sh) 180% of current shareprice “Chariot continues to apply the strict capital discipline demonstrated during the drilling of Prospect S in Namibia and its significantly reduced annual cash overhead. As a result, the Company has a strong cash position, with unaudited year-end cash estimated to be US$19 million. The Company remains debt free with no licence commitments across its entire portfolio.” The $19m makes no sense - we started H2 with $28.4m cash in the bank: We drilled Prospect S with our share of costs at around $12.16m (76% of $16m) The H2 2018 G&A Costs amount to around $2.4m We were told that the year end cash balance would be above $14m in the previous operational update, which would be about right based on my calculations. So, where has the additional $5m come from?